[Verse 1] When banks collect mortgages from every street They bundle them up to make debt complete A CDO is born from this pooling game Taking many loans and giving one name Investors can buy a slice of the pie But there's more to learn, let me tell you why [Chorus] CDOs, CDOs, bundled debt that flows Cash flow owns the bonds, synthetic just suppose Real assets versus derivatives, that's the key to know CDOs, CDOs, that's how structured finance grows [Verse 2] Cash flow CDOs hold the actual debt Mortgages and bonds in a portfolio set When homeowners pay their monthly fee The money flows to you and me But if defaults rise the payments fall Cash flow CDOs feel it all [Chorus] CDOs, CDOs, bundled debt that flows Cash flow owns the bonds, synthetic just suppose Real assets versus derivatives, that's the key to know CDOs, CDOs, that's how structured finance grows [Verse 3] Synthetic CDOs take a different route They use derivatives to follow suit Credit default swaps track the risk But don't own bonds, that's the twist They bet on whether debt will pay Without owning loans along the way [Chorus] CDOs, CDOs, bundled debt that flows Cash flow owns the bonds, synthetic just suppose Real assets versus derivatives, that's the key to know CDOs, CDOs, that's how structured finance grows [Bridge] Tranches split the risk from high to low Senior, mezzanine, equity below Complex structures built on borrowed dreams Nothing's ever quite the way it seems [Chorus] CDOs, CDOs, bundled debt that flows Cash flow owns the bonds, synthetic just suppose Real assets versus derivatives, that's the key to know CDOs, CDOs, that's how structured finance grows [Outro] From simple loans to complex trades Understanding how the system's made CDOs can amplify the gain But also multiply the pain
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